Gold prices rose to their highest in nearly a week Tuesday as the euro rallied 1 percent versus the dollar, but volume was light and short-term traders were unwilling to take big risks before year end. Commodities rose generally along with stock markets as investors' focus on positive US economic readings, an successful Spanish debt auction and an improved German business reading sharpened their appetite for higher risk assets.
Spot gold was up 1.35 percent at $1,614.39 an ounce at 1400 EST (1900 GMT). Prices approached, but did not reach the 200-day moving average at $1,621.43 an ounce. Bullion broke below the key technical level last week for the first time since January 2009, when prices slid about 7 percent. US February gold futures settled year end, prices stuck to narrow ranges.
Spot gold was up 1.35 percent at $1,614.39 an ounce at 1400 EST (1900 GMT). Prices approached, but did not reach the $20.9 per ounce, or 1.31 percent, higher at $1,617.6 an ounce. "The afternoon rally in risky assets and gold seems to have been spurred by better-than-expected US housing data, which in turn further pushed the US dollar lower," said BNP Paribas analyst Anne-Laure Tremblay.
Confidence in the metal remains fragile as concerns persist that policymakers' efforts to address the eurozone debt crisis are inadequate and could keep European assets under pressure. "All the bull-run dynamics are still in place, but you have this trend of the strengthening dollar, positive data out of the United States as opposed to weak data out of Europe," said VM Group analyst Carl Firman.
"Profit-taking and year-end book squaring by large investors, including mutual funds and macro hedge funds ... help explain the recent drop in prices," said HSBC in a note. Among other precious metals, silver was up 2.3 percent at $29.52 an ounce, tracking gold. Spot platinum was up about 1.2 percent at $1,427.49 an ounce, while spot palladium was up about 2.8 percent at $622.44 an ounce.
ETFS Physical Palladium, the US-based exchange-traded product operated by a unit of London's ETF Securities, saw an outflow of nearly 25,000 ounces, data for Monday showed, the largest one-day drop in its holdings in more than a fortnight. Its holdings have nearly halved this year, to just over 588,000 ounces from 1.1 million ounces on January 1.
Meanwhile Swiss trade data released on Tuesday showed Russia exported 5.16 tonnes of palladium to Switzerland in November. Russia is the world's biggest palladium supplier, selling both mined metal and government stockpiles onto the market. The statistics also showed South African platinum exports reached their highest monthly level this year in November, at 3.7 tonnes. "The surge in metal shipments from South Africa could be an early warning sign which suggests that idle metal, which is not taken up by industrial users, is now being parked in the Swiss clearing system," said Swiss bank UBS in a note.